Opinion: Housing discrimination, in particular, is felt generation after generation

WASHINGTON (MarketWatch) — Now that we’ve gotten past thinking that the election of a black president proves that we’re all post-racial, America is finally again engaging in a real discussion about how much racism is a part of our national story.

This isn’t just ancient history. It’s not just about slavery, which officially ended nearly 150 years ago. Or about Jim Crow, which officially ended nearly 50 years ago. As much as we’d like to think that the oppression is all in our past, we have to accept that history, even the ugly bits, is a part of who we are today.

The power of Ta-Nehisi Coates’ provocative essay in The Atlantic, “The Case for Reparations,” is the way he shows that the threads of history extend into the present in sometimes surprising ways.

No, none of us living today owned slaves. Few of us have held the lash, or marched as a lynch mob. But if we are Americans, then we’ve inherited the legacy that was built by stealing the labor, the freedom, the lives and the wealth of black people. We may be innocent but we have blood on our hands.

The heart of Coates’ essay is a detailed history of how blacks have been denied the American Dream of owning their own home. African-Americans were systematically excluded from the middle class for 100 years after slavery ended. It’s a heartbreaking read, but it’s essential for us to know this history.

Before the 1930s, fewer than 50% of Americans owned their home. The New Deal and the pro-housing policies after World War II changed that, with the creation of federal housing programs, including the Federal Housing Administration and the Home Owners Loan Corp.

The FHA helped create the white middle class and the suburbs they fled to, but most blacks were locked out of FHA-backed loans by the notorious practice of red-lining, which declared whole neighborhoods off limits to normal lending. If even one black family managed to move into a desirable neighborhood (that is, a white neighborhood), then the whole neighborhood could be red-lined, which meant that no one could get a federally backed mortgage or a business loan.

Blacks who wanted to own their home were steered into ghettos and into the clutches of predatory lenders. They paid more for a home, and they had few legal protections.

Segregation wasn’t enforced by the Klan, it was enforced by the U.S. government, aided by the insurance industry, the mortgage industry and all the white homeowners who stood to lose everything even if they harbored no personal animosity toward blacks.

This isn’t just ancient history, but part of our lives today. Red-lining was supposedly outlawed in the 1960s, and again in the 1970s and again in the 1990s, but the practice hasn’t been fully eradicated.

During the sub-prime boom, African-Americans were more likely to be offered subprime loans, no- doc loans or other forms of predatory loans than white homeowners with similar incomes and credit scores. And, as a result, African-Americans were more likely to lose their homes or to find themselves underwater on their mortgage.

Housing still isn’t free of discrimination. And housing matters a lot for building wealth.

MarketWatch

The typical white family had $110,500 in net wealth in 2011, while the median wealth of black families was just $6,314, mostly because black families have been discriminated against in the housing market.

According to the latest Census Bureau data on wealth, the median American household had $68,828 in net wealth in 2011 (half of households had more, and half had less). Among 78 million families that owned their own home, the median net worth was $161,826, while the median net worth for the 37 million families who rent was $2,066. Excluding the value of their home equity, owners had a median net worth of $47,297.

In other words, if you don’t own a home, you probably aren’t building any wealth to speak of. And if you don’t have any wealth, then you can’t pass anything along to your heirs. Your kids and your grandkids start with two strikes against them.

The homeownership rate for black households is 44%, compared with 73% for white households.

The wealth figures for black households reflect that. In 2011, the median black family had $6,314 in net wealth, compared with $110,500 for whites not of Hispanic origin. Excluding the value of their home, the median black family had just $2,124 in net worth, not even enough to pay for a funeral.

For every $1 in wealth held by the typical white family, a black family had 6 cents. Remember, these are figures for middle-class families, not the poorest of the poor.

Only 6% of black families own stocks or mutual funds outside of a retirement account, only 7% own their own business, only 11% have an IRA. Every generation has to start out with nothing and build what they can.

What happened in the distant past of the 1960s and in the more recent past of the 2000s matters: Because wealth isn’t just something a person accumulates by themselves, it’s something that families share to help them get over the speed bumps of life.

My parents weren’t born into property, but thanks to public education, the GI Bill, and housing and retirement policies that helped white middle-class families, they managed to accumulate some wealth. And their little piece of the rock was the safety net that gave them piece of mind that an illness or a loss of a job wouldn’t ruin them forever.

And their wealth helped me get an education, and buy a home. And my small wealth has helped my kids finish school and get started on their own lives. It’s no different than the story millions of families tell.

Now imagine how that story would have turned out if the first few steps on that ladder had been missing. ...

Much of the response to Coates’ essay has been to show how impractical and politically impossible reparations would be. But these critics ignore how much the government already spends every year to nurture the wealth of the (largely white) middle class: the mortgage-interest deduction, tax breaks for retirement savings, tax breaks for employer-provided health insurance, and even Social Security (which excluded about 65% of African-Americans when it was enacted in 1935).

“Housing discrimination isn’t sexy,” Coates said in an interview with the New Republic recently. It sure isn’t. But it’s worth thinking about all the same.

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